Overnight Gaps & Chop

Overnight Gaps & Chop

The market price action this week has been mostly contained in the overnight gaps with choppy, directionless chop throughout the day as we continue to test price resistance.  This morning the futures suggest another gap, but this morning it’s the bears doing the pushing as we head into a busy morning of economic data.  Jobless estimates expect another 2.5 million Americans applied for unemployment, but with nearly 35 million already without work, the market has mostly ignored these historic numbers.  Perhaps they will do the same today.

Asian markets closed the day with modest declines across the board, and European markets are lower by about 1% reacting to Euro Zone economic data.  US Futures are choppy this morning but point to a lower open ahead of earnings and financial data as we slide toward a 3-day weekend.  Stay focused on price as anything is possible as markets react to news and challenged by overhead price resistance.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 77 companies fessing up to quarterly results.  Notable reports include A, AINV, BBY, BJ, DECK, HPE, HRL, INTU, NVDA, PANW, ROST, SDRL, SPLK, TK, and TJX.

Technically Speaking

So far, the majority of the index price action has occurred on the morning gap, with the remainder of the day filled in choppy sideways trading.  Keeping with the tradition, the futures point to another substantial gap heading into a big day of earnings and economic data.  Global virus cases reached 5-million, with the US sadly holding the record of the largest number of infections and a death toll of nearly 95,000.  However, according to the news, all 50 states are in the process of reopening the least part of their economies.  Let’s hope we don’t see another surge of infections as a result, and we can on with the business of recovery. 

As of the close Wednesday the all the major indexes continued to struggle with price resistance levels.  Both bulls and bears seem equally matched after yesterday’s morning gap.  Interestingly, the Absolute Breadth Index rose yesterday during the chop, although it remains in an overall downtrend.  T2122 continues to signal in the bearish reversal zone suggesting a short-term overbought condition.  As we head into a busy morning of economic data and wait for reports from tech giants like NVDA and INTU, the futures point to a gap down open.  Keep in mind volumes could begin to drop off quickly if traders wind down their week early heading into the 3-day Memorial Day holiday.  Plan your risk carefully heading into the long weekend and continue to expect overnight price volatility to remain challenging.

Trade Wisely,

Doug

Whipsaw

Whipsaw

Very volatile price action at yesterday's close and on overnight whipsaw that's once again challenging price resistance levels is likely has traders scratching their heads wondering what comes next?  I suspect there were many traders stopped out by the selloff at the end of the day, and there will short traders also seeing losses this morning with the overnight reversal.  Could we see a short squeeze this morning big enough to break through resistance, or will the bears continue to hold the line?  Your guess is as good as mine.

Asian markets closed mixed but mostly flat on the day.  European markets are dancing around the flat-line this morning cautiously, monitoring economic recovery efforts.  US Futures are boldly gaping up once again ahead of earnings and economic reports that include the FOMC minutes at 2 PM eastern today.  Buckle up for another bull/bear battle at price resistance and plan for price volatility to remain challenging.

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have 65 companies stepping up to report.  Notable reports include ADI, RDY, EXPE, HUYA, LB, LOW, MCK, SCVL, TTWO, TGT, VER & ZTO.

Technically Speaking

After yet another overnight gap, the market spent the rest of the day chopping sideways struggling to find the energy to break through resistance.  Then at the end of the day, a report suggesting the release of a virus treatment way too soon as critical testing metrics were still missing created a sharp market selloff.  The volatile price action continued through the evening as overnight futures rebounded, adding insult to injury for those stopped out in yesterday's whipsaw.   Those putting on short positions will also fell the pain this morning as futures push for another gap up opening that may create a bit of short squeeze this morning. 

The DIA, SPY, and IWM left behind bearish engulfing patterns at price resistance levels yesterday with the SPY showing the 3rd failure at price resistance.  However, the overnight whipsaw is once again challenging price resistance, and the possibility of a short morning squeeze may be just enough to push prices through this level.   Of course, a lot will depend on today's earnings and economic reports that include the FOMC minutes.  Even with the late day selling, T2122 suggests a short-term extended condition, and the Absolute Breadth Indicator continues to downtrend, making for a very confusing market condition.  Coupled with chart resistance and wild price volatility, what comes next is anyone's guess!  Be careful not to chase the morning gap, getting caught up in fear of missing out.  Stay focused on price waiting for proof that gap up can find buyers this morning.

Trade Wisely,

Doug

Hopeful Clinical Trial

After learning of a small but hopeful clinical trial of a Covid-19 treatment, the market lept higher yesterday to challenge the upper range of resistance of the DIA, SPY, and IWM.  The big move left a big gap below, and unfortunately, the Absolute Breadth Index declined as the big-4, AAPL, AMZN, MSFT, and GOOG continue to dominate the indexes.  Perhaps today the bulls will find the energy to push through the resistance, but it would not be out of the question to see some profit-takers come in after a one day move of more than 900 Dow points.

Asian markets rallied overnight on hopes of a virus treatment.  European markets are trading cautiously flat this morning, and the US futures have recovered early losses to indicate a flat open ahead of earnings and the congressional testimony of Jerome Powell. 

Economic Calendar

Earnings Calendar

Retail in focusing the Tuesday earnings calendar with less than 50 companies reporting results today.  Notable reports include HD, WMT, AAP, NTES, SINA, URNB & WB.

Technically Speaking

The day after a massive surge in the indexes on the back of warm and fuzzy Powell comments as well hopeful virus treatment news.  President Trump reviled yesterday that he has been taking hydroxychloroquine as a preventative virus treatment for the last couple of weeks.  Health officials quickly discouraged that course of action, suggesting possible harmful side effects.  After an investigation of the WHO, the President is threatening to cut off funding the organization permanently.  He has given the WHO 30 days to make substantive improvements accusing them of being China-centric.  Home Depot, HD reported sales jumped 7% last quarter, but costs associated with the coronavirus weighed down profits for the quarter, sending the stock down by 3% early this morning.  WMT will also report before the bell this morning, shedding light on pandemic impacts on retail.

The DIA, SPY, and IWM tested the upper range of the consolidation yesterday as the bulls raced in reacting to hopeful news.  The SPY briefly popped above recent resistance but by the close slid back just enough to leave questions in trader's minds.  Early this morning, futures were pointing to a pullback of more than 100 points, but as the morning progresses, the tenacious bulls have clawed back the decline.  The T2122 indicator jumped into the bearish reversal zone on the big rally; sadly, the Absolute Breadth Index declined to suggest fewer and fewer stocks are responsible for lifting the indexes. Will the bulls find the inspiration to break the current resistance, or will the bears find the energy to continue their defense?  Perhaps, we will find out today.  Plan your risk carefully, staying focused on price action as the battle begins. 

Trade Wisely,

Doug

More Stimulus?

Stimulus

Friday evening, the House passed a 3-trillion dollar stimulus bill, but it's unlikely to pass the Senate and if it should the President has vowed to veto.  Jerome Powell sees the possibility that the US GDP could shrink by as much as 30% in comments made this weekend.  However, as states begin to reopen the US Futures only see bullishness this morning even as the Covid-19 death toll tops 90,000 with more than 1000 American dying almost every day of the last 2-weeks.

Asian markets closed in the green overnight even as Japan slips into recession.  European markets are bullish this morning as Euro-zone continues to lift lock-down restrictions.  US Futures point to a gap up of nearly 400-points ahead of earnings and a light day of economic news. Let's party with the bulls but keep a close eye on the overhead resistance of this wide-range consolidation on the DIA, SPY, and IWM.

Economic Calendar

Economic Calendar

On the Monday earnings calendar, we have 120 companies reporting their quarterly results.  Notable reports include BIDU, APLE, BILI, IQ, SFTBY, TRVG.

Technically Speaking

US Futures are surging this morning as investors weighed comment by Chairman Jerome Powell suggesting the GDP could shrink more than 30%.  He said, struggling retail will continue to struggle even as the country reopens, suggesting that businesses will have to deal with sales volumes 25 to 50 percent of normal.  Rather grim statements, but the bulls don't seem to care, choosing instead to rally hard in the pre-market action.  Apple has plans on reopening 25 stores this week, requiring mandatory masks and temperature checks.  Several states are opening health clubs and restaurants with new social distancing requirements.  New US rules requiring special licensing to sell chips to Huawei will be a big blow to the Chinese 5G tech giant and may also stir trade tensions between the US and China.  Friday evening, the US House passed a 3 Trillion dollar stimulus package that would send another $1200 to American taxpayers.  However, the package has little chance of passage I the Senate, and the President has vowed to veto the bill should it reach his desk. 

As the county reopens, only 3% of the population has been tested, with 1.4 million cases recorded thus far.  More than 1000 Americans have died from Covid-19 almost every day this past week, as the death toll tops 90,000.  To say the reopening will be challenging my be the understatement of the year.  Last week's hold of the 50-day moving averages is a technically positive signal.  However, traders should also note that we remain in a large consolidation range in the DIA, SPY, and IWM.  At the end of the last week, the absolute breadth of the overall market continues in a downtrend as the big-4 does most of the heavy lifting.  With the futures pointing to a considerable gap up open this morning, keep an eye on overhead resistance levels as the T2122 indicator is likely to reach an overextended condition.

Trade Wisely,

Doug

Impressive Hold of Support

Impressive Hold

Yesterday the bulls pulled off an impressive hold of price support and the 50-day averages of the DIA, SPY, and IWM with the oil and financial sectors leading the way.  The question today is will that rally continue heading into the weekend after a big morning of economic reports that set shockingly bad market records.  This morning futures are quite volatile as they wait for the big data drop.  Buckle up for the possibility of a wild ride.

Asian markets close overnight little changed even after reporting there industrial output number came in better than expected.  European markets trade mixed its eye on economic reports and uncertain economic reopening.  US futures indicate anything is possible by the time the market opens as they grapple with a substantial economic data drop.

Economic Calendar

Earnings Calendar

On the Friday earnings calendar, we have more than 170 companies reporting quarterly results.  Notable reports include DKNG, JD, MFG, PBF, & VFC.

Technically Speaking

After a very rocky start on Thursday morning, the bulls stepped up, putting in a solid defense of critical price support levels.  Oil and financial stocks led the rally with JPM recovering 4% and AXP lifting more than 7%.  Follow the Jerome Powells call for additional Congressional stimulus the President appears likely to support another round of direct payments to citizens.  The House plans to vote on a 3 trillion dollar plan as early as today, but Senate leadership continues to say it will not support the current bill.  What comes next is unclear, but it seems the pressure for policymakers to continue to rack more up historic deficit spending measures soon. 

Yesterday’s rally created an impressive hold of the 50-day average on the DOW, SPY, and IWM indexes.  The market-leading QQQ maintained a comfortable cushion between its price and critical averages.  Futures this morning are showing a considerable amount of volatility ahead of a big day of economic data.  Topping that list is Retail Sales with estimates suggesting a historic decline in consumer spending is likely.  In just the last hour, futures have gone from pointing to a bullish open to now suggesting a substantial gap down.  Plan for considerable volatility as we head into a weekend of uncertainty as more and more states try to reopen their economy.

Trade Wisely,

Doug

Jerome Powell Warns

Jerome Powell

The FOMC Chairman Jerome Powell said they stand ready to do whatever is necessary to support the economy but also warned that the recovery is likely long-lasting impacts for business and employment.  He also called on Congress and the Whitehouse, suggesting more will be required to stimulate the economy.  According to reports, China has launched cyberattacks against virus research firms attempting to steal possible treatment options.  With friends like this who needs enemies!

Asian markets closed the day lower across the board, with Japan falling nearly 2%.  European markets are trading lower this morning with the FTSE down more than 2% this morning.  US Futures have flirted with a flat to slightly bearish open as we wait on earnings and, of course, another jobless report that may add 2.5 million to the 33 million already unemployed.  Expect higher price volatility as we head toward the weekend.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have our biggest day this week, with 300 companies reporting.  Notable reports include AMAT, ACB, BAM, DENN, NOLK, PBR, SSYS, & WIX. 

Technically Speaking

The futures tried to get a rally going in yesterday’s pre-market but was unable to hold onto gains gaping lower after a disappointing PPI number.  Jerome Powell delivered a word of warning that the recovery is likely to be difficult and may have lingering impacts for several years.  He reassured that the FOMC would continue aggressive operations as long as necessary and but said they would need more help from Congress to stimulate the economy.  Long story short, this will be a costly, challenging, and likely very volatile economic recovery.  In other news, the US is reporting that the Chinese government has launched cyber-attacks against virus research facilities attempting to steal research on treatments and possible vaccines.  Companies are encouraged to strengthen their security and report any attacks or breaches to the FBI. 

At the close yesterday, the DIA was less than 3 points away from it’s 50-day moving average and near a critical level of price support.  The IWM missed testing it’s 50-day by only a few ticks before bouncing in the last few minutes of the day.  The SPY held at the price support to 5/4/20 clinging to the 34 EMA, but looking at the QQQ, the selloff of the last couple days is nothing more than an overextended pullback.  We have a somewhat volatile overnight future session that currently suggests a flat to moderately bearish open.  However, with 300 earnings reports and another jobless number where another 2.5 million people will be added, the 33 million already unemployed, anything is possible by the open.  With a big day of economic data on Friday, we should expect an extra dose of price volatility as we slide into the weekend.

Trade Wisely,

Doug

Bearish Engulfing Candles

Bearish Engulfing

After hearing some sobering health officials testimony in congress, profit-takers rushed in at the end of the day, leaving bearish engulfing candle patterns on all the index charts.  Those that got short early will now have to deal with a morning gap up inspired by a proposed 3-trillion dollar stimulus bill the includes more direct payments to citizens.  Although the House plans to pass the bill, the Senate is currently suggesting it will be dead on arrival.  Expect more price volatility in the coming day as a result.

Asian markets closed the day mixed but mostly lower in a modest trading session.  European markets are lower across the board as virus reemergence fears weigh on investors.  Fueled by the prospect of more government debt spending, the US Futures point to a gap up open ahead of earnings, Powell comments, and the latest reading on PPI.  It could be a wild and woolly day, hold on tight!

Economic Calendar

Earnings Calendar

On the Hump Day earnings calendar we have just short of 150 companies reporting today.  Notable reports include CSCO, JACK, SDS, & TCEHY.

Technically Speaking

After attempting to break resistance in intra-day price action, the QQQ finally found some profit-takers and the big-4 turned quickly south.  Health officials in congressional testimony gave a sobering opinion and warned that reopening the economy to soon could create a wave in new infections that may get out of control.  They said the chance of having a vaccine by the next school and college season is unlikely and warned of a resurgence of the virus next fall.  The report seemed to shake the overall market that has strongly rallied over the last month with very optimistic views of reopening.  Then overnight the House democrats unveiled a new 3-Trillion dollar stimulus bill that once again provides direct payment to citizens.  As usual, the prospect of newly printed money and governmental debt spending rallied the overnight futures that currently point to a significant gap up at the open.  The Senate has already stated it is unlikely to pass their chamber.

Yesterday’s closing selloff left bearish engulfing candle patterns near resistance levels on all the major index charts.  Unless there is an outside influence, a bearish engulfing candle suggests a follow-through down is likely.  However, this morning there is the possible 3-trillion outside influencers changing the prospect of follow-through and punishing those that took short positions.  To be fair even with yesterday’s quick selloff, there was no major technical breach with all the indexes hold above support levels and their 50-day averages.   However, it did offer up a quick reminder of how quickly the tide can shift and how dangerous a wide consolidation range can be when it does.  Plan your risk carefully and expect a bit more challenging price volatility for the rest of the week.

Trade Wisely

Doug

Hopefulness

Hopefulness

The hopefulness of the economic reopening and news of a possible democratic 2-trillion dollar stimulus bill written in private continued to inspire the bulls yesterday.  As the NASDAQ stretched its rally to 6-days in a row, the DIA, SPY, and IWM continue to struggle with overhead resistance.  The range of consolidation is quite wide, adding some danger to a possible pullback.  For example, the Dow would have to pull back as much as 1200 points just to test its 50-day average.  Plan your risk carefully as we approach price resistance.

Asian markets closed modestly lower overnight after reporting a miss in inflation data.  European markets are mixed as concerns rise over a coronavirus comeback.  US Futures are once again trying to put on a brave face pointing to bullish open ahead of the 8:30 AM CPI number that could double the negative reading from last month.  Will, it matter or will we continue to ignore?  We will find out soon.

Economic Calendar

Earnings Calendar

The Tuesday earnings calendar has just over 150 companies reporting quarterly results.  Notable reports include CSPR, DUK, GAIN, HMC, IR, LOGI, MAC, & TM.

Technically Speaking

The NASDAQ reached out for the 6th day in a row as the big-4 continue to carry the majority of the weight.  The DIA, SPY, and IWM remain locked in a wide range of consolidation above their 50-day averages but remains challenged by overhead resistance.  The bulls are drawing energy from the hopefulness of the reopening of the economy, but health officials are warning that rushing opening will cause undue suffering and death.  Who’s right?  No one truly knows, and I’m not going to armchair quarterback their decisions, remaining grateful these difficult decisions are not mine!  With the death toll now over 81,000 and infections, nearly 1.4 million, I think the recovery will be long and very challenging. 

The T2122 indicator suggests that the markets are a bit stretched, but the upside momentum continues to favor the bulls.  Goldman Sachs reiterated their belief that the overall market will retract about 20% over the next 3-months while the house democrats attempt to write a 2-trillion dollar stimulus bill in private.  One thing for sure, the market has a lot to grapple with as we move forward.  Earnings season winding down the market will have to deal with the humbling economic numbers.  Today we get the latest reading on the CPI that consensus estimates expect to come in at -0.8, doubling from the prior month.  We also have a virtual parade of fed speakers, including comments from Jerome Powell on Wednesday morning.  Stay focused on price action and be careful not to overtrade as the indexes test resistance levels. 

Trade Wisely,

Doug

Technically Difficulties

Good morning everyone.  Due to a Windows Update there will be no written blog this morning however if you follow the link below I will have a link to the late Morning Market Prep Video.  Sorry for the inconvenience but it was out of my control.

Tenacious Bulls

Tenacious Bulls

The tenacious bulls push indexes higher even as unemployment soars to 33 million.  The NASDAQ recovers all of the 2020 losses with as APPL, AMZN, GOOG & GOOGL do the majority of the heavy lifting even as the Absolute Breadth Index remains in a downtrend.  It would seem in light of unprecedented government spending the idea of working and company production is an outdated concept easily replaced by mountains of debt.  Will the historic Employment Situation number matter?  We will see in a couple of hours.

Asian markets rallied to end the week with Japan up more than 2%.  European markets are bullish across the board this morning, and US Futures continue to power higher this morning ahead of job numbers and earnings.  As we head into the weekend, don’t be too surprised if some profit-takers take advantage of the gap up, reducing risk.

Economic Calendar

Earnings Calendar

The Friday earnings calendar indicates about 150 companies will step up and report.  Notable reports include BLMN, EXC, TWNK, KIM, NBL, PPL, SEAS, SWCH, & VTR.

Technically Speaking

More bullishness yesterday as the indexes rose more than 1% as the NASDAQ recovers all of 2020 losses even as the country deals with 33 million unemployed.  Today the Employment Situation number is expected to report the worst jobs report in the countries history, but somehow that does not seem to matter.  How can this be?  I believe it is all in the weighting of the averages.  MSFT, AMZN, GOOG & GOOGL account for nearly 20% of the SP-500.  So is the SP-500 reflective of the actual market condition?  With the Absolute Breadth Index still showing a downtrend, one might have to answer that question with a no.  Combine that with trillions of dollar’s flooding in from government stimulus where debt no longer matters and an extremely accommodative central bank the SP-500 reflecting the actual market condition is all but impossible.

Technically the DIA, SPY, and IWM remain bullish but locked in a tightening consolidation pattern with the tech-heavy QQQ enjoys the majority of the benefits of the big-4 titans continue to rally.  I get asked the question nearly every day. How long can this continue?  My answer is always the same.  Stay focused on the price and trade the chart.  The trend is the trend until the trend breaks, and right now, it seems the bulls have an unquenchable desire for risk no matter the state of the economy.  That said, please remember that gap up opens near index highs, and price resistance levels have the potential to find profit-takers creating a pop and drop pattern.  As of now, US futures indicate a strong gap up open in total defiance of unemployment that may well continue through the end of the day.  However, don’t rule out the possibility that profit-takers could take advantage of the gap closing trades and avoiding the weekend risk.

Trade Wisely,

Doug

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